The movie Devotion tells the story of Jesse Brown, the first Black aviator in U.S. Navy history, and his friendship with Tom Hudner, who became the Navy's most celebrated wingmen. The film makes points about race, friendship, heroism and the Korean War, sometimes referred to as the forgotten war. Those are important, but the movie offers forgotten economic lessons for today as well.
The two Koreas that emerged from the disaster of war offer a case study in what causes economic development, that is, poverty reduction. The Koreas are an important experiment because, as in all good scientific experiments, only one variable changed - the economic institutions. Before World War I, Korea had been unified for twelve centuries. The culture and language were uniform, and the “Hermit” kingdom was one of the poorest on the planet.
In 1910, Japan colonized Korea and built industries to supply Japan and later its war against Asia. Japan confiscated land so that, “By 1930, the colonial government was by far the largest landowner in Korea possessing almost 40 percent of Korea’s land area…Even though by the end of World War II, Korea was, after Japan, the second most industrialized nation in Asia, the human costs of the colonial period were massive, and most Koreans were poor and uneducated.”
After World War II, The U.S. and U.S.S.R. divided Korea at the 38th parallel into the American (South) and Soviet (North) occupation zones. Two years later the North invaded the South and the Korean war began. Three years later, the war ended at the 38th parallel with tens of thousands of Americans and far more Koreans and Chinese dead and the Korean peninsula destroyed. In the 1960s, per capita GDP of South Korea was about $1,600.
By 2011, GDP per capita had risen to $32,000 in the south. What happened? South Korea embraced mostly capitalist economic principles. It helped that Christianity grew rapidly there, too, which suppressed envy enough to allow for innovation.
Meanwhile, North Korea clung to Marxist economic policies even as the Soviet Union collapsed, Eastern Europe destroyed the Iron Curtain and China launched its rise to prosperity through slightly freer markets. Up to a million people died by famine during the 1990s and North Korea remains one of the world’s poorest nations.
North Korea, the old Soviet Union, China under Mao, Venezuela and Cuba are examples of the principles of Marx taken to their logical conclusion. Socialism must make nations totalitarian and poor if the government follows Marxist policies consistently and without regard to consequences, as F.A. Hayek demonstrated in his classic book, The Road to Serfdom.
Of course, socialists in the U.S. such as Bernie Sanders and Alexandria Ocasio-Cortez don’t want to follow socialism to its logical conclusion because they know about those disasters. They don’t want to eat the whole golden goose, just a leg or two, something like what Europe has done. They see capitalism and full socialism as two great evils and believe a golden mean exists in which they can take only the good from each and leave the worst behind, thereby creating paradise. They believe they could achieve that through heavy business regulation, taxation and redistribution of wealth.
But the fact is that there is no golden mean. Those in the poorest fifth in the U.S., which is far from being capitalist, are among the planet’s richest people and equal in standards of living to the average citizen of the European Union. And U.S. citizens are freer. Democratic socialism in Europe hasn’t achieved paradise. It has stopped the slide into poverty and totalitarianism somewhere in the middle. The U.S. could be more like Europe by becoming poorer and less free through more socialism.
Hayek explained that the slide into poverty and less freedom happens because every government intervention in the market produces consequences that even socialists don’t like. But instead of rolling back socialist policies, they demand greater socialism to combat the bad outcomes of previous policies. Eventually, the increased poverty and lack of freedom become too much and people rebel against more socialism.
It’s good to remember the Korean War for the heroism of the soldiers and for its economic lessons.
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